Most people focus on savings, pensions, and investments when it comes to their financial planning, and protection can sometimes be overlooked. But what is the real value of buying peace of mind? Put simply; it will provide your family with an important level of financial security. Let’s look at the types of protection available and the various benefits.
Buying peace of mind with: Life insurance
Life insurance pays out a lump sum to your partner or family after you die or, in some instances, if you’re diagnosed with a terminal illness. It’s a valuable form of protection, as it can help your family cover mortgage payments and household bills, especially if you are the main earner. One of the main benefits of life insurance is the fact you can rest assured that your family home will be secure.
There are different types available:
- Level term assurance is where a specific sum is paid out if you die during a fixed time period.
- Decreasing term assurance is where a decreasing sum is paid out in connection with a repayment-style mortgage, reflecting the remaining balance.
- Whole-of-life insurance has no fixed term and will pay out regardless of when you die. This type of insurance is regularly used in inheritance tax planning (IHT) because it can be written “in trust,” and there can be tax exemptions on premiums.
- Death-in-service benefits – some people have this type of life insurance through their employer, which pays out if they die while still employed. Usually, this sum equates to around two to four years’ salary. Check if you have this cover with your employer.
Buying peace of mind with: Income Protection
If you are unable to work due to a disability or illness, income protection can help you to manage your mortgage payments and household bills. You will have peace of mind that your family home will be secure, which can help you avoid getting into debt.
Income protection provides you with a monthly payment, which is a proportion of your salary, typically around 50% – 70%. Although the sum paid is lower than your salary, it is tax-free, which means you might receive a similar net sum equivalent to your usual salary. Usually, payments continue until you go back to work or retire.
As the terms can vary considerably for this type of cover, always check policies carefully or speak to our team for advice. In addition, some employers offer income protection as an employee benefit, so check whether this is available through your workplace.
Buying peace of mind with: Critical Illness Cover
Sadly, anybody can get a critical illness at any age. A critical illness policy can cover you for a wide range of serious conditions, such as heart attack, stroke, cancer, and many more. This type of cover pays out a tax-free lump sum, which you can use to cover your outgoings, mortgage payments, and household bills. You could also use the lump sum to pay for your treatment.
One key benefit of a critical illness policy is that it can reduce stress and worry during a difficult time, giving you the space to recover from your illness. This type of financial protection provides you and your family with much-needed cash when you cannot work.
As some types of critical illness cover are more comprehensive than others, check the list of specified conditions to see what’s covered by a particular policy. Also, find out the average age of claimants for certain critical illnesses by reading our previous blog, Critical illness at any age.
Private Medical Insurance
Due to lengthy NHS waiting lists, many people are taking out private medical insurance to fast-track healthcare appointments and scans. This type of insurance enables you to receive quicker treatment for minor and serious conditions.
Private medical insurance is a valuable form of cover for business owners and the self-employed. This can help them reduce any time off sick, which could have a big impact on business activities, continuity, and revenue.
If you’re employed by a large company, you may have access to discounted private medical insurance as one of your employee benefits. So, check if this is available at your workplace.
Getting the right types of protection in place will give you peace of mind that you and your family will have a level of financial security should the worst happen. Insurance payments act as your safety net when you’re facing health challenges, giving you a cash injection when you need it the most. Whether it’s in the form of a lump cash sum or a monthly payment, financial protection gives you time to get back on your feet.
If you would like to check any existing insurance policies or need protection advice, get in touch to speak to our independent financial planners.